Chartists can easily compare an indicator with the underlying security by placing the indicator directly behind the price plot. This can be done by choosing “behind price” as the “position” in the indicator setting. The example below shows the S&P 500 with gray bars and MACD (5,35,5) in red. The signal line for MACD is in blue. Note that I set MACD at (5,35,1) to remove the histogram and then added the 5-day EMA as a separate indicator of MACD. This technique can be used for all indicators, including RSI, the Stochastic Oscillator and CCI.
Click on this image for a live chart.
MACD (5,35,5) currently remains below its signal line, but the indicator firmed the last few weeks and looks poised to break above its signal line. This would be positive for momentum and signal an upturn in prices. Should such a breakout occur, the late May low would become support for MACD (5,35,5) and a break below this level would be bearish.